Japan's J-SOX Targets Corporate Crime

Japan's J-SOX Targets Corporate Crime

Article excerpt

Scandals at Japanese corporations are prompting the government to
curb white-collar crimes in a more, well, American way.Japanese
companies have been tainted in recent years by accounting scandals
reminiscent of Enron. In response, the government has approved its
own version of the Sarbanes-Oxley Act of 2002.The new guidelines,
known informally as J-SOX, are intended to make executives
accountable for actions they take and to protect investors with
greater transparency."The new guideline is a departure from the
traditional Japanese business style based on trust and belief that
humans are fundamentally good," says Shinji Hatta, a professor at
Aoyama Gakuin University in Tokyo. Mr. Hatta chairs the government
committee that crafted the guidelines.The law doesn't go into effect
until April 2008. But companies are expected to start implementing
it this April as, experts say, such rules have become a worldwide
standard with publicly traded companies.What's unique about the
Japanese guidelines is that they give pointers on reporting
requirements, but leave executives room to interpret what should be
covered.That provision is a response to perceived shortcomings of
the US law. But, says Nobuhito Utsunomiya, consulting-service
business unit manager at NTT Data Corp., "J-SOX's strength of not
being specific is ... creating confusion. Corporations and auditors
are having a hard time agreeing on ... an acceptable level of
implementation."The wake-up call for reform came with the Seibu
Railway scandal. The company was delisted from the stock exchange
for falsifying financial records.Other spurs came from the Livedoor
and Murakami Fund scandals, still on trial, which rocked the nation
with accounts of inflated profits through stock transactions and
insider trading.The rise in accounting fraud is due in part to a
more profit-driven American style of business over the past decade,
says Hatta.As regulators impose the law, however, they hope to avoid
some of the pitfalls of the US version of the act. J-SOX asks
companies to take a top-down risk approach, forcing executives, for
example, to take responsibility for their company's accounting. …